(Appendix 13C) Stockinger Corporation has provided the following information concerning a capital budgeting project: $\begin{array}{lr} \text {Investment requiredin equipment. }&\$280,000\\ \text {Expected life of the project. }&4\\ \text { Salvage value of equipment. }&\$0\\ \text { Annual sales.}&\$580,000\\ \text {Annual cash operating expenses }&\$420,000\\ \text {Working capital requirement. }&\$30,000\\ \text {One-time renovation expense in year 3}&\$80,000\\ \end{array}$ The company's income tax rate is 35% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

A) $128,500 B) $160,000 C) $90,000 D) $76,500 A) $128,500 B) $160,000 C) $90,000 D) $76,500

Exam 30: Income Taxes and the Present Value Method

Eison Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The income tax expense in year 3 is:

(Multiple Choice)

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Question 61

Dunstan Corporation is considering a capital budgeting project that involves investing $450,000 in equipment that would have a useful life of 3 years and zero salvage value.The company would also need to invest $20,000 immediately in working capital which would be released for use elsewhere at the end of the project in 3 years.The net annual operating cash inflow,which is the difference between the incremental sales revenue and incremental cash operating expenses,would be $220,000 per year.The company uses straight-line depreciation and the depreciation expense on the equipment would be $150,000 per year.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting.The income tax rate is 35%.The after-tax discount rate is 11%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 62

A company needs an increase in working capital of $50,000 in a project that will last 4 years.The company's tax rate is 30% and its after-tax discount rate is 8%.The present value of the release of the working capital at the end of the project is closest to:

(Multiple Choice)

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Question 63

(Appendix 13C) Boynes Corporation is considering a capital budgeting project that would require investing $200,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $490,000 and annual incremental cash operating expenses would be $330,000. The project would also require an immediate investment in working capital of $10,000 which would be released for use elsewhere at the end of the project. The project would also require a one-time renovation cost of $70,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 14%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 64

(Appendix 13C) Hinger Corporation is considering a capital budgeting project that would require investing $120,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $350,000 and annual incremental cash operating expenses would be $250,000. The project would also require an immediate investment in working capital of $10,000 which would be released for use elsewhere at the end of the project. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 35% and its after-tax discount rate is 11%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 65

(Appendix 13C) Reye Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 9%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 66

(Appendix 13C) Vanzant Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 3 is:

(Multiple Choice)

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Question 67

(Appendix 13C) Mesko Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 68

(Appendix 13C) Lafromboise Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 69

(Appendix 13C) Houze Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 70

Shanks Corporation is considering a capital budgeting project that involves investing $600,000 in equipment that would have a useful life of 3 years and zero salvage value.The company would also need to invest $20,000 immediately in working capital which would be released for use elsewhere at the end of the project in 3 years.The net annual operating cash inflow,which is the difference between the incremental sales revenue and incremental cash operating expenses,would be $300,000 per year.The project would require a one-time renovation expense of $60,000 at the end of year 2.The company uses straight-line depreciation and the depreciation expense on the equipment would be $200,000 per year.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting.The income tax rate is 35%.The after-tax discount rate is 15%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 71

Galati Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation.The depreciation expense will be $20,000 per year.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting.The income tax rate is 30% and the after-tax discount rate is 8%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 72

(Appendix 13C) Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment requiredin equipment. \2 80,000 Expected life of the project. 4 Salvage value of equipment. \0 Annual sales. \5 80,000 Annual cash operating expenses \4 20,000 Working capital requirement. \3 0,000 One-time renovation expense in year 3 \8 0,000 The company's income tax rate is 35% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 73

(Appendix 13C) Prudencio Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 3 is:

(Multiple Choice)

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Question 74

Income taxes have no effect on whether a capital budgeting project should or should not be accepted in a for-profit company.

(True/False)

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Question 75

Marasco Corporation has provided the following information concerning a capital budgeting project: The income tax rate is 30%.The after-tax discount rate is 13%.The company uses straight-line depreciation on all equipment; the annual depreciation expense will be $20,000.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. The net present value of the project is closest to:

(Multiple Choice)

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Question 76

(Appendix 13C) Planas Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 14%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 3 is:

(Multiple Choice)

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Question 77

(Appendix 13C) Rollans Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 2 is:

(Multiple Choice)

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Question 78

(Appendix 13C) Bourland Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 8%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 79

Patenaude Corporation has provided the following information concerning a capital budgeting project: The expected life of the project and the equipment is 3 years and the equipment has zero salvage value.The working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment and the depreciation expense on the equipment would be $230,000 per year.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting.The net annual operating cash inflow is the difference between the incremental sales revenue and incremental cash operating expenses. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 80

Showing 61 - 80 of 150

Eison Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The income tax expense in year 3 is:

A company needs an increase in working capital of $50,000 in a project that will last 4 years.The company's tax rate is 30% and its after-tax discount rate is 8%.The present value of the release of the working capital at the end of the project is closest to:

Income taxes have no effect on whether a capital budgeting project should or should not be accepted in a for-profit company.

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Production Costs

Job-Order Costing: Cost Flows and External Reporting

Process Costing

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Super-Variable Costing

Master Budgeting

Flexible Budgets and Performance Analysis

Standard Costs and Variances

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Statement of Cash Flows

Financial Statement Analysis

Cost of Quality

Activity-Based Absorption Costing

The Predetermined Overhead Rate and Capacity

Job-Order Costing: a Microsoft Excel-Based Approach

Fifo Method

Service Department Allocations

Analyzing Mixed Costs

Time-Driven Activity-Based Costing: a Microsoft Excel-Based Approach

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Standard Cost Systems: a Financial Reporting Perspective Using Microsoft Excel

Transfer Pricing

Service Department Charges

Pricing Decisions

The Concept of Present Value

the Direct Method of Determining the Net Cash Provided by Operating Activities

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